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GROW YOUR SUPER WITH PROPERTY
How does it work?The starting point is the SMSF. You may have a SMSF already, or if you are in a retail fund it can be converted into a SMSF for you through our cooperating partners (some conditions may apply). A SMSF can invest in different assets in order to build and accumulate your superannuation funds for retirement. In principal, a SMSF is not allowed to borrow and therefore cannot enter into any gearing or leverage arrangements. This means that ordinarily if a SMSF wanted to buy a property it would have to finance 100% of the property purchase price plus costs involved in the acquisition.
The Structure
However with the use of an Ungeared Unit Trust (UUT) the UUT can purchase the property with funds provided by you (usually 80% of the purchase price) and funds from your SMSF (usually the remaining 20% plus purchase costs). While the SMSF is not allowed to borrow money, you, the individual can. Normally the individual would borrow the required 80% against existing assets such as other real estate. These funds are then paid to the UUT and the individual receives 80% of the units in the trust. In the meantime the SMSF gives the UUT the remaining 20% along with enough funds to cover the purchase costs such as stamp duty, conveyancing and loan costs.
Both, you and the SMSF, are bound by a Joint Venture Agreement that defines the rules of investing through the UUT. The SMSF cannot borrow but you can. As the personal investor you can provide 80% of the funds for investing in the UUT which you can borrow from the bank. The UUT is now in a position to finance 100% of the purchase price plus any costs of an investment property that the SMSF was unable to finance before.
The Process
Over time there will be additional contributions to your SMSF from a number of potential sources including the superannuation guarantee contribution (9%) by your employer and you may also as an individual contribute up to $150,000 per year. All of these contributions will only be taxed at 15%. As your contributions to your SMSF increase the SMSF can buy additional units from the UUT. These units must be made available for sale by you, the personal investor. This means you are selling units and your SMSF is buying them through the UUT with moneys that have only been taxed at 15% less any available deductions.
The Result
Eventually, the SMSF owns all the units and therefore will own 100% of the underlying investment property. You in the meantime have been negatively gearing 80% of the value of the property and then incrementally you have been receiving all of your money back to pay off the original debt you incurred and indeed if the property value has increased you would have made a profit. Your tax benefits from negative gearing will reduce proportionately to your ownership percentage as you sell units back to the UUT.
Upon calculated reflection you will find this, to be one of the most powerful wealth creation strategies available in the market today.
- Grow your Super
- How does it work?
- Step by step
- What are the benefits?
- How to get started?
Warning
No investment advice is provided to you. This presentation is not designed
for the purpose of providing personal financial or investment advice.
Information provided does not take into account your particular investment
objectives, financial situation or investment needs. You should assess whether
the information in this presentation is appropriate to your particular
investment objectives, financial situation and investment needs. You should do
this before making an investment decision on the basis of the information in
this presentation.
The concept and details presented on this page formulate a possible strategy
only and require the involvement of various professional experts in their
fields. You should seek the assistance of the appropriate experts as
explained above.
Equity Resource Financial Planning always consider alternative strategies as
part of their financial planning advice which we are happy to provide to you on
an individual basis. Equity Resource Financial Planning is an Authorised
Representative of
PATRON Financial Advice AFSL No 307379.
Strategy today.
Freedom tomorrow
